Shrinkflation

Shrinkflation is a phenomenon where retail products decrease in size or quantity over time while their prices remain the same or increase, effectively raising the cost per unit for consumers. This practice often goes unnoticed by shoppers, as companies may choose to downsize packaging or reduce the amount of product within a package without changing the exterior design, leading to consumer confusion. Shrinkflation can impact a wide range of products, from snacks and beverages to household goods, ultimately eroding purchasing power and contributing to a perception of inflation without the corresponding increase in prices.

This tactic is often employed by manufacturers as a response to rising production costs, including raw materials, labor, and transportation. While it allows companies to maintain profit margins, it can lead to consumer dissatisfaction and a sense of betrayal as shoppers realize they are receiving less value for their money. This also contributes to economic inequality, disproportionately affecting low-income households that may be less able to absorb the hidden costs of reduced product sizes. 

Shrinkflation has a notable history that reflects broader economic trends and consumer behaviors. The term emerged in the early 2000s but describes a practice that has been used for decades. One of the earliest recorded instances occurred during the 1970s oil crisis, when rising costs for raw materials and energy led many companies to reduce product sizes instead of raising prices outright.

In the 1980s, inflation rates were high, and consumer packaged goods manufacturers began using product shrinkage more strategically to cope with increased costs while maintaining market share. For example, common snacks and household items saw size reductions while prices remained stable, allowing companies to avoid alarming consumers with visible price hikes.

The trend resurfaced prominently during the 2008 financial crisis, as businesses faced economic pressures that necessitated cost-cutting measures. Consumers, however, remained largely unaware of these changes until they started to notice less value in their purchases.

In the wake of the COVID-19 pandemic and subsequent supply chain disruptions, many companies again turned to this practice as a way to manage costs while trying to maintain customer loyalty.

In a 2022 report from the consulting firm KPMG it was revealed that nearly 61% of US consumers had noticed shrinkflation in products they purchase regularly. The impact of this phenomenon can be observed across various industries; for instance, a survey by The New York Times found that 50% of consumers reported seeing reduced quantities in snack foods, with many popular items losing anywhere from 10% to 25% of their original size while prices remained the same or even increased.

In the UK, a 2021 study conducted by Which? found that more than 2,500 products had undergone product shrinkage, with reductions of up to 20% in size. This trend was particularly pronounced in the food sector, where grocery prices rose by an average of 5.1% in 2022, yet companies opted for package downsizing as a less noticeable way to cope with rising costs. The phenomenon not only affects consumers' wallets but also contributes to a sense of distrust in brands; 83% of shoppers express dissatisfaction when they feel misled about product value.